Below comes a lecture
at the COST A7 economic conference in Budapest, February 28-30, 1994, about the convergence of Hungary to the
West/Common Market. Then, 13 years ago, opinions were both more optimistic and
more pessimistic than now. The Volume of the conference was published in 1995
as Kovács J. (ed.): Technological Lag and
Intellectual Background, DartmouthPubl., Aldershot, 1995.

Our lecture, however,
dealt mainly with the past: Hungary from her
foundation (the Christmas of 1000 AD) is converging to the West. I give the
1994 text without modifications; only 5 endnotes
marked with capital letters in Lucida Calligraphy have been added, well separated
at the end.

The present version
is, however, not the edited book contribution. I did find an MS-DOS Word 4.0
text file from 1994, and various graph and data files
as MS-DOS Grapher, MS-DOS PaintBrush
or even simple data files. So the coming document is a reconstruction. Only
obvious mistypes have been corrected.

****************************************

ATTEMPTS
FOR CLOSING UP BY LONG RANGE REGULATORS IN THE CARPATIANBASIN

At the end of the
Migration Period the CarpathianBasin (and the whole
region of Eastern Central Europe) did not belong to the Western civilisation,
but was the westernmost part of the steppe cultures. However, the state of the CarpathianBasin accepted
(Western) Christianity in 1000, and started to introduce laws conform to
Western standards. Then started a close-up by long range
regulators. This process is followed in the present paper.

1. INTRODUCTION

Prof. J. Kovács has
introduced in [1] the concept of long range regulators as the governors of the
social-economic processes of the different societies in different civilization periodes.

He identifies 5 long
range regulators in the modern age. These are:

1. Public sector, the
ratio of the public to private sectors.

2. The system of
education.

3. The system of
research and development.

4. Technical development,
innovation.

5. The system of
planning based on forecasting.

In the following paper
we try to formulate the close-up strategies in a region of Europe, called Eastern
Central Europe, in the terms of long range regulators. As for the results, some
characteristics of societies will be discussed; from cca.
1850 including quantitative data (employment, production,
GDP/capita, etc). The data are taken mainly from Refs. 2, 3, 4 and also from handbooks, not referred. For a more
detailed quantitative review, see Ref. 5.

In summary our main
theses are as follow. In our approach we distinct two historical long range regulators.
These are:

I. The legal system of
the civilization.

II. The culture of the
civilization.

The five long range
regulators of modern age listed above had evolved from these historical long
range regulators. The long range regulator 1.follows from the historical long range regulatorI., and regulators
2., 3., and 4. had evolved from the historical long
range regulator II., while the long range regulator 5. has
evolved from both as a superposition.

By the study of the
history of the different civilizations one can say that the two regulatorsI. and II. determine the evolution of a civilization. Roughly speaking
the legal system of a civilization determines the "kinematics" of
that civilization, while the culture of that civilization determines the
"dynamics" of that civilization.

In the second chapter
of this paper we show that in the last one and half thousand years one can
observe three distinct civilization existed up to the
II. World War in Europe. These are as
follow:

the
civilization of west Europe evolved from the
unification of Roman law and German private land ownership in culture dominated
by Roman Catholicism;

the
civilization of east Europe evolved from the
unification of Byzantine law and Slav village community land ownership in
culture dominated by the Greek Orthodoxy;

the
civilization of east central Europe: in this
civilization the culture was dominated by the Roman Catholicism and the legal
system is also based on the Roman law but it lacked both the German private
land ownership and the Slav village community land ownership.

The closing up
attempts of east central Europe to West Europe always meant a
closing up to the legal system of the West especially in the property law.

After
the II. World War east central Europe was dominated by
the Soviet Empire and the basis of the east European civilization (law and
culture) was introduced by brute force in this region. In recent years, after
the fall of the Soviet Union in 1990 east central Europe has started to
recover of its own civilization and formulated a medium scale closing up strategy
to the West civilization.

In the third chapter
of this paper we try to formulate the necessary quantitative conditions of this
closing up in the framework of a simplified growth model. According to the
results of this study for Hungary to catch up the per capita GDP of Portugal
(the less developed country of the EU) in 2005 it needs external financial
source between 8 to 16 billion USD distributed on the ten years time interval
increasing manner from a lower amount to a higher amount at the end of the
period. The lower external source (the bottom 8 billion USD) comes from the
criteria that the hidden economy can be successfully legalized, while the
higher external source (the top 16 billion USD) comes from the criteria that
the hidden economy cannot be successfully legalized.

2. THE REGION FROM
HISTORICAL VIEWPOINT

The topic of this
paper is the present and future of the close-up strategies of the CarpathianBasin. This Basin
(except a strip on the South) is defined by geographic realities. However it is
a part of Eastern Central Europe, and such pseudogeographic
terms as Eastern Europe, Central Europe &c. have rather doubtful and
ill-defined meanings at the end of the 20th
century, and therefore first we have to define the region to be investigated,
and, furthermore, we have to show evidences that it is indeed a coherent region
with some common social, economic &c. laws and behaviour.

Some pieces of the Eastern Central European
history (e.g. some steppe connections) are rather exotic for Westerners. So the
Appendix gives brief notes of histories of important steppe nations.
Unfortunately the fine details of such histories are often in Hungarian, not
translated. The same holds for the history of the Basin.

First we define our
region, and then try to give the evidences for coherence afterwards. East
Central Europe here will be the self-governing or self-determining part of a
roughly vertical strip on the map, from the Adriatic Sea to (or almost
to) the Baltic Sea. The borders are: the Holy Roman
Empire of the German Nation on the West; the borderline between Catholicism
(later all the filioque successors) and Greek
Orthodoxy on the East; the Adriatic and the heartland of the
Balkan (or again the religious borderline) on the South and the Hanseatic and Prussian territories at the Baltic Sea on the North.
Now we are going to show that this region, defined not quite economically, was
indeed a semicoherent region in the last thousand
years, however all its borderlines were of course fluctuating and semipermeable.

For the western border
it is worthwhile to note three facts, two negative and a positive ones. First,
the region never belonged to the German Empire, therefore it did not share the
legal system of the Empire, furthermore, it never had
a complete and many-layered hierarchy of feudal vassallage.
The reason will be given immediately. Second, the substrate population here was
not the free German warrior-farmer (subjugated only later on the West) with his
own primordial piece of individual land. Third, in contrast to the Greek
Orthodox territories on the East, private ownership of lands and individual
rights of at least the ruling classes were fully established from the first millenium AD. These three initial conditions predetermined
a unique historical development for the region.

The lack of a
many-layered hierarchy of vassallage comes from the
war tactics of the Eastern mounted warriors, occupying East Central Europe
during the migration period. As excavations show, in the sixth century still
both German and Eastern societies had 3 different groups of the population. In
the Lombard law the hierarchy levels were the lance-bearing
freemen named arimanni or barones.
The whealtier members of this class had a complete
armament of lance, shield, sword, helmet, etc., expensive and hard and long to
learn to use; the poorer members had incomplete armament, but always at least a
lance. Another group which still belonged to the army but was
unable to hand-to-hand combat, was the aldiones, who
were archers. The third group is the skalks,
who were slaves without the possibility and right to fight. A full-property
owner is a person who can defend his own property, therefore it seems that the
original private owners were the barones; among them
a definite social stratification can be observed. The Pannonian
Lombard graves indicate that the freemen outnumbered the half-free archers. The
contemporary Gepids, after long previous Hunnish rule, show the opposite ratio [6].

Originally the Avars, replacing the Lombards in Pannonia on the Easter Monday, AD
568, had also the discrimination between heavy and light armaments, but in
their army the archers were also mounted. It is possible that in this time they
still had a hierarchy of rights, but their legal system is practically unknown.

During the subsequent
centuries, however, the social evolution diverged. To the west of a fault line
roughly along the Vistula and Danube the half-free
archers became insignificant (but remember Robin Hood, who led archers and
tradition is ambiguous if he were a poor nobleman or a commoner), and the most
efficient subclass of warriors became the heavy mounted knight, which type of
fighting needed enormous training and investment; around and below them the
light mounted and the foot warriors became dependent on them. The economic and
legal reflection of this evolution can be seen in the legal texts from the
empire of Charlemagne, where poor freemen are continuously offering the ownership
of their own lands to the wealthy for defence and for getting rid off the duty
of going into battle. So the natural result is the hierarchic society of more
and more partial rights of greater and greater number of population.

On the east of the
fault line, on the open steppe, the evolution went into the opposite direction.
The few heavy cavalrymen vanished, except that some such armament remained in
formal use in ducal families, and at the end of the Migration Period,
conveniently put to the occupation of Hungary by the Magyar tribes in 896 AD,
the Eastern armies were composed almost purely of light mounted archers. In
addition the steppe conquerors were at least partly nomadic, so they could
change the locations of their communities if needs be. Therefore land-ownership
was more or less temporary, while the property rights of cattle and horse were
well defined. As a natural consequence, when these migrating peoples stopped at
the west end of the Eurasian grassland and had to settle down, ownership was
got by the numerous and more or less equal light mounted archers. Their
relative number at the first millenium AD must have
been remarkable, since even at the end of the Middle Ages, after centuries of
economic inhomogenisation, the ratio of nobility is
around 10 % in Poland and Hungary, and definitely higher in Croatia.

So at the first millenium the full-right class of Eastern Central Europe is
numerous, and legally equal. (The first elaborate document of the Hungarian
constitutional evolution, the Bulla Aurea from 1222
AD, only 7 years after the Magna Charta, definitely states the unity and
equality of nobility; naturally an ideal whence reality deviated, which was
just the reason to demand a royal law.) Below them we find the subjugated
population in which the Germans were rare exceptions (as e.g. the EasternizedGepids in Eastern Hungary). Excavations do
not indicate private ownership of land below the warrior class; there is no
trace of unification of privately owned small estates here at the first millenium, which would be the parallel of the evolution in
the Empire. Rather, the new lands were first taken by the whole army, and later
distributed by the leaders among the numerous free warriors. So here evolution
started from a homogeneous unity towards the spread of the notion of private
ownership in bigger and bigger part of the society.

This East Central
European territory gets Christianity from the West, from Rome. At the first millenium the Christian Church of Europe is still
theoretically undivided; the Rome-Constantinople dualism comes from the dual
administration of the Roman Empire after Theodosius the Great.
At different parts of this region the predominance of Roman influence has
different reasons.

In Poland originally the
converting activity could came only from the West. Namely the Kievian Russia took Christianity only in the second half of
tenth century, in which time the archbishopric of Gniezno was already founded.

Hungary contained two
earlier Roman provinces (Pannonia and Dacia), and parts of the Barbaricum between and above them. Dacia was completely evacuated by
Aurelianus in 271 AD, therefore no ecclesiastic
organisation survived. As for Pannonia, the territory
was always administrated from Rome until the defeat
of Avitus, 455 AD, when it became lost forever for
the Western Empire. (For the lack of any Greek influence in PannoniaRomana see the dream of
Emperor Probus, in which the ghost of Apollonius of Tyana spoke him in unnatural Latin because he did not
expect a Pannonian to understand Greek [7].) Anyways,
Pannonia is very near to Rome, and in 795 it
temporarily became incorporated into the western empire of Charlemagne.

As for Croatia, remember that
the so called Southern Slavic ("Yugoslavian") nations are mainly of
Western origin. The German name of Slovenians is Wend, which indicate an
original location in the neighbourhood of Venice. The Serbs and
the Lausitz Wends (Sorbs) must be closely related
according to their common own name Srb. Finally the
similarities between Serbian and Croatian languages indicate that the ancestors
of the Croatians must have also been located in the Elbe region. For all
the present knowledge both ancestral tribes were pushed to the East by the
settling Avars returning from Thuringia between 562 and
568. Since these Slavic groups were settled down on both sides of the demarcation
line of Theodosius,A
the Eastern groups were subjugated by the Byzantian
Empire about 630, at the weakening of the AvarKhaganate (when the dynasty of the founder Bayan became extinct); by definition Croatia is the
territory which remained under Western influence (and later both neighbouring
nations were employed for defending the borders of the two regional centers against the other neighbour). The name "chrvat" (Croat) comes from a Sauromatian
tribe, i.e. the Croatian nation was organised by Sauromat
leaders. Fig. 1 shows Europe just before the end of the AvarChaganate. (Formally the
Frank dominions became an Empire 5 years later.)

Fig. 1: Europe in 795

But the whole
administration, and specially tax-collecting of the WesternChurch was based on the
individual owner, either from Roman Law or from German
customs. So when Christianity became accepted, the Church not only established
a heavy Western legal and ideological influence but also taxed the families
individually. This helped to spread the clear definition of pieces of lands
belonging even to subjugated families, therefore helped the individual family
husbandry even without legally owning the land.

In 1054 happened the
Great Schism between Rome and Constantinople, existing even now,
and thenceforth the cultural ties to the Byzantine East were severed. In the
whole Roman region the Church was in symbiosis with the State (while on the
East the Church was subjugated), therefore the prohibition of ecclesiastic
connections acted against other connections as well. Therefore from 1054
practically no cultural influences came from the Byzantine region. This
definitely does not mean closed borders. True, the Carpatians
shielded Hungary from the East,
and a consequence is that in later times Hungary got Byzantine
incursions not from the East but from the South. But Poland was without any
natural border on the East. Indeed, 896 is only a theoretical end of the
Migration Period; latecomers, as for example Petsenegs,
Cumans and OsetianJazones crossed the Eastern border of the region as late as
the early fourteenth century, but these new groups were incorporated and
assimilated into the societies of the region, giving special local colours but
not altering the foundations of these societies. Fig. 2 is Europe in 1076, just
when King Zvonimir of Croatia has been
successful to free his country from Byzance. Observe
that the 3 Roman Catholic countries east of the German Empire roughly continue
the territory of the mounted peoples on Fig. 1, except that Bulgaria went to Byzance. There was a short period in 864 even there for
trying to make agreement with Rome.

Fig. 2: Europe in 1076

The first close-up
stage in Hungary was the
acceptance of Christianity, and privatisation of a part of state property to
warriors and local leaders [8]. (There was a second wave of privatisation
during Andrew II, in the first half of 13th
century, leading to dominance of private estates over ones of the State.) After
that the ruling class was accepted by the Western feudal lords and knights as
their peers. As a proof, note that the Eastern border of the common Western heraldics were the eastern borders of Poland, Hungary and
Croatia; for example in Russia the rules of heraldics
were imported by Tsar Peter the Great in the late seventeenth century, who
founded the so called GeroldmaisterskaiaKontora, an office of evidently German name. So this
close-up strategy was politically successful; the society started to converge
to the western ones even at the bottom levels.

This convergence was
helped in some territories by Western immigration. This process was, however,
quite different in the three medieval sister countries. In Poland, the so called DrangnachOsten
is still a point of discussion: but, no doubt, about the first millenium German population moved into the north of the
later Kingdom of Poland, establishing
there a German substrate. Later, a military Order (The Teutonic Knights),
having evacuated the Holy Land, went to the so called Prussia (after a short
interlude in Hungary), and colonized
the territory before the Poles. This was followed by a massive German
immigration, and this is the reason that we have serious doubts to extend the
region under investigation until the Baltic Sea. (We are not too
interested in political or linguistic histories but rather in evolution of
societies.)

Otherwise a number of
Polish cities were founded by German burghers who remained the dominant element
for centuries there. But in Central and Southern Poland no substantial
German population could be found outside the cities.

In Hungary the story was
different. Pannonia belonged to the
Frank Empire and later to its eastern successor state for almost a century.
Although her German population was very sparse, it seems that the western fringe
of the territory had a Franko-Bavarian strip, and
this population remained undisturbed at the conquest of the Magyar tribes.
Afterwards Hungarians were continuously raiding Western Europe for two
generations and without any doubt a substantial number of Western captives were
brought into Hungary who may have
contributed to the farming and artisan population. After the first millenium the Kingdom of Hungary is receiving Western
immigrants, and in the twelfth century King Geyza II
organizes the first large scale implantation of Saxonians,
who went first into the south-eastern part of the Basin (Siebenbürgen
Saxons) and later also to the north-eastern one (Zips). These groups were
farmers, and the settling process was organised from the Hungarian side.

In the same time some
families of the German nobility seeked fortune in Hungary, and became
incorporated into the Hungarian ruling class. The cities were founded, refounded or extended by Italian, French and German
immigrants. While the survival of Roman elements is utterly improbable until
the foundation of the Hungarian state, a rather unexplained fact is the
survival of the wine culture of the Balaton Highland,
initiated by Emperor Probus in the third century.

Croatia did not have
these massive immigration processes. However, at her Adriatic coast she had a
chain of cities continuous from late West Roman times, with a Neolatin population, whose language (extinct from 1898) is
called Dalmatian. (Some time in the Renessaince
period these cities switched to Italian.) This coastal region gave Croatia an organic
connection to the developed world even without any immigration.

As for higher culture
and economy, also some definite convergence was seen, the Hungarian currency
followed Bavarian style from the first millenium, and
in the first half of the fourteenth century Hungary and Croatia (in an
English-Scottish style personal union between 1091 and 1918) immediately
followed the leading Italian states in the use of reliable golden coinage. As a
special explanation, note that in this time the economic, cultural and
innovative center of Europe was in Northern Italy,
just in the neighbourhood of Croatia and Hungary. The region was definitely notperipheric
in this time.

During this period Hungary is always in a balancing
position between the imperial superpowers of Germany and Byzance. Note that this properly appears in the title of Archiregnum, i.e. a kingdom without any imperial overlordship; the parallel is the Kingdoms of France and England. (Indeed, the
Holy Crown of Hungary came directly from the Pope, and it is closed above,
compared to the open crown of Croatia.) On the north Poland had no neighbour
on her east comparable to the German Empire, and on the south Croatia was in
connection only with the Byzantine superpower. After the temporary evaporation
of the Greek Orthodox superpower in the Fourth Crusade (1204) Hungary (in personal
union with Croatia) tried to fill
in the vacuum on the Northern Balkan. It is not trivial if these territories
became parts of East Central Europe or not; e.g. Bosnia was Roman Catholic but
with a strong Bogumil or Kathar
heresy, but here we deliberately ignore the question, because later the 500
year Ottoman occupation removed again these lands from the region.

It is interesting to
observe the repeated recurrences of unifying tendencies within the region. Hungary and Croatia got a common
king in 1091 and this status (slightly more than a personal union) remained
unchanged until 1918, but during this period always two nations existed with
two parliaments. The border between the two states was a matter of common
agreement, but changes were rather exceptions. As for Croatia + Hungary and PolandC, the first personal union happened
in the 1370's under a Hungarian king, and in the next century it was repeated
three times backwards. Still the Hungarian-Polish border is practically
constant from the 11th century; from 1918
it became the Czechoslovakian-Polish border, and from 1993 the Slovakian-Polish
one, but it is still unchanged. Therefore foreign dynasties from within the same
region do not mean colonialization or territorial
losses, therefore there was no danger for asking help for the country attacked
from outside.

Between 1450 and 1500
a serious change happens in the position of the region. The center
of world commerce and innovations leaves Northern Italy and goes to the
Atlantic shores. The reasons are manifold, but the final cause is the discovery
of America; thenceforth the
Mediterranean Sea lost primary importance. Afterwards the
region belongs to the periphery, gets only indirect pull from the center, and in the same time starts to have to defend
itself against the Ottoman invasion. Croatia and Hungary get the invasion
frontally, while Poland is more or less
a secondary theater of war for the next two
centuries. Fig. 3 is Europe in 1491.

Fig. 3: Europe in 1491

In the next two
centuries the Ottoman Empire is a substantial factor in
the region. There is a continuous border fighting in the middle of Hungary and Croatia, while Poland is continuously
attacked on her southeastern periphery. Since Northern Italy is also a theater of war from 1494, the southern part of the region
can hope support only from Poland or from the
West, the German Empire. The Polish support could not stop the Ottoman advance,
and from the middle of the XVI. century the Ottoman Empire keeps the southeastern half of Croatia occupied, and
also a third of Hungary which strip runs
roughly vertically in the center.

However
still the eastern and western boundaries of the region are intact. On
the east the border is still the Eastern Carpathians, not occupied,
and further up the border of Russia is roughly the
River Dnieper. (Our guess is that the eastern border
of our region is somewhere to the West from the Dnieper, but it is
rather hard to draw there a definite line. In the eastern parts of Poland and
Lithuania (in personal union) the population is then a Greek Orthodox
peasantry, with Catholic landowners, tax collectors and warriors, a number of
Armenian and Greek merchants, and in the Zaporozhye,
some Orthodox free warriors known as Cossacs. We
would rather avoid to discuss the economy and
sociology of that area.) The western border deserves some discussion. From 1526
Hungary (together with Croatia) is in personal
union with the Archduchy of Austria, practically with the German Empire under
the Hapspurgs. Still the western border continues to
exist (and unchanged up to 1920), Croatia and Hungary do not join to
the Empire, keep their own legal systems, and the societies continue to give
different answers to the challenges. E.g. in the first wave of reformation half
of Germany converts to
Lutheranism, Austria herself remains
Catholic, but the majority of Hungary becomes
Calvinist. (One of the reasons is, of course, that Luther made some pro-Ottoman
speeches, so his teaching was not too attractive in a fighting situation for Hungary in distress.) In
the same time Poland and Croatiaremain Catholic; our guess is that the reason is to clearly
distinguish themselves from Greek Orthodox neighbours of very similar
languages. Hungary and Croatia gets some
financial support for the continuous fighting from the neighbouring parts of
the Hapspurg estates, and the frontier is stopped in
the heartland. Two centuries of fighting disturbed the economic development,
but it seems that this factor was only one amongst a few. As mentioned, the center of the European economic life is no more in Northern Italy; what is more,
the silver and gold mines of Hungary (not occupied)
become secondary in comparison to those in America. As the scarce
surviving data show, in this time Hungary only partly
participates in the inflationary tendencies of the West. In the same time she
does not follow the development of industry, but specializes for food
production for Western customers. The same is true for Poland.

In the same time the
Ottoman occupation disturbs the internal commerce in Croatia and Hungary, but does not
stop it. The demarcation line does not develop into a true border. Hungarian and
Croatian laws remain valid for the non-Moslim
subjects of the Ottoman Empire in the occupied areas. The
Ottomans tolerate even the taxation for the rightful landowners and for the
enemy states. Occupied cities of Hungary get their law
books confirmed from the King of Hungary, who is incidentally the German
Emperor. Guilds in the occupied area keep legal and commercial contact with
brother organisations of the free areas.

Still the continuous
fighting and the agricultural specialization have a consequence unique in Europe, which is
sometimes called "the second serfdom". In these centuries the
peasants are being gradually freed from personal dependence on the West, and in
lesser extent in the Empire. In the same time in our region there is the very
populous warrior class with a real function, and there is a need to organise
the mass commerce of wheat and meat to the West. So they take this role too,
and again subjugate the peasants, who cannot be independent because they need defense against the invaders. It seems that the more
important factor is the agricultural specialization, because the subjugation is
stronger in Poland, not occupied,
and the weakest in Croatia, where the
Ottoman danger is the strongest, but the territory is not too good for mass
production of food.

Poland looses large
territories on the East from the middle of the XVII. century.
However it is not too clear if these territories were really the parts of
Eastern Central Europe.

From the beginning of
the 18th century the Ottoman Empire ceases to
influence the region. Croatia and Hungary remain in
personal union with each other and with the Hapspurg
lands, but they continue to keep their identities as well. During the 18th century both countries, but mainly Hungary, are getting
German immigrants to the depopulated territories, and the wounds of the
previous two centuries start to heal up. In the same time Poland has no intrinsic
connections to the German Empire, but is more and more the object of Russian
political and military influence.

At the end of the 18th century the region looses territories on the
northeast. This is the 3rd partition of Poland. Thenceforth up
to now, except for 20 years between the World Wars, the former Eastern Poland belonged to Russia. (From 1991 to Ukrainia.) Henceforth
Eastern Central Europe reduces to Croatia, Hungary (personal union
still) and the so called Galicia or Southern Poland, belonging to Austria until the end of
the First World War.

The Napoleonic Wars do
not disturb too much this reduced region. Hungary even enjoys some
prosperity from food production for the armies. From 1815 the reduced region is
in peace, and has the possibility to try to close up to the more Western parts
of Europe. Indeed, in Hungary then starts the
so-called Reform Age.

2.1.
The "reform age" of the CarpathianBasin

Emperor Francis I lost
the throne of the German Empire in 1806, when the western German territories
had been occupied by Napoleon. From that time the Hapspurg
rulers used the title of Emperor of Austria, although there was no state called
Austria. From this time
the connections of the "Austrian" and Bohemian territories became
weakened with the Western half of the Empire. However in principle the Empire
itself was not dissolved, therefore we continue to regard the Austrian and
Bohemian lands as parts of the Western Central European region. In 1815 Austria got back Galicia, and acquired Dalmatia (taken
previously from Venice by France.) Galicia was claimed by Hungary in 1772 when Austria took it; Dalmatia also was claimed
via Hungarian or Croatian (or both) arguments: she was continuously disputed
between Croatia (orHungary) and Venice from the Fourth
Crusade, and earlier (back to 1076) had belonged to Croatia. So both Galicia and Dalmatia was governed
from Vienna, but did not
belong in any sense and on any right to the Empire. Therefore we must consider
both territories as parts of Eastern Central Europe.

Now remember that
close-up strategies imply some
organisation and planning. If individuals learn techniques from more advanced
regions, such an activity may or may not be successful, may or may not result
in some close-up, but it is not a close-up strategy. We concentrate on
strategies. But the formulation and execution of a close-up strategy and
programme needs some kind of a body politic, which can make decisions and can
enforce them at least in some extent. By other words, some kind of a parliament
is a precondition. The optimal case would be an independent country, but in the
period just considered no part of Eastern Central Europe was independent in the
sense as used in the last century. Galicia and Dalmatia had some Landtäge, which were responsible for taxation and education
in some restricted sense. However the only parliaments with full souvereignities were the Hungarian and Croatian ones. For
example, the Hungarian parliament offered the taxes, made laws (valid if signed
by the King of Hungary, incidentally the same person as the Emperor of Austria)
and the government of Hungary was the
Chancellery of Hungary (strangely enough in Vienna). So the
Hungarian Parliament definitely was in the position to formulate and execute a
strategy for developing the country, even if it could not enforce directly the
acts on the government. (The situation was slightly similar to that in England during the reign
of Charles I.)

Indeed, the Hungarian
Parliament did formulate some steps for close up. Some laws created between
1825 and 1844 were parts of such a strategy. They wanted to change or
manufacture some long-range regulators of the national economy. We can classify
these ones into the following groups:

1)
Education, Research & Development, &c.

Introduction
of the majority language into legal life. Effects: extension of culture
to a large part of population; minority frustrations on the periphery.

Organisation
of a network of industrial training schools. Wanted effect: increase of
the level of industrial skills; however the law was not signed by the King.

Erection
of the HungarianAcademy
of Sciences. Effect: the state starts to organise research, industrial development
and import of ideas from developed countries.

2)
Modernization of the legal system (of economy)

Creation
of separate Hungarian laws for finance (credit) &c.

Transformation
of the feudal ownership of lands into a Western-type property. Effect:
market of lands; ability for investment into agriculture.

Freedom
for erecting factories independently of the guild membership of owner or
employees. Effect: weakening of guilds.

3)
Infrastructure

Licences
and tax reductions for channel and railway creation.

Decision
for a permanent bridge on the Danube. Effect: the
first bridge across the Danube in east-west direction,
therefore permanent connection between the eastern and western parts of the
Basin.

Planning and starting
of river regulation. Effect: prevention of regular floods on the Great
Hungarian Plains, therefore new agricultural land and safer traffic.

While these steps had
only a limited effect on close up, Hungary was able to do
this autonomously, having her own legislative body. Other parts of the region
were able to regulate only the educational regulators at best. This continuous
legislative activity was interrupted in 1848 by the Austrian-Hungarian war; in
1849 Hungary was defeated,
the Hungarian Parliament dissolved, and no part of the region was
self-regulating until 1867.

2.2.
The age of dual monarchy

In 1867 the
Austro-Hungarian or Hapsburg or Danube Monarchy was rearranged according to an
agreement between the Austrian and Hungarian leading political groups, and in
1868 there happened a subsequent agreement between Hungary and Croatia. Thenceforth the
situation was as follows.

In first approximation
the Monarchy consisted of two independent states, loosely called as Austria and Hungary. In this context
Austria means Austria proper, Bohemia, Trieste, Slovenia, Dalmatia, Galicia and Bukovina (the last one
should be classified to Eastern Europe). The Hungarian
half consisted of Hungary and Croatia. In Austria the constituent
lands had no home rule; however they had local administration and a limited
autonomy in education and culture. There was a souvereign
Imperial Parliament in Vienna for all the
Austrian lands.

In Hungary there was a
Hungarian Parliament as well as a Croatian one. However a great number of
issues were common matters and in them the decisions were made by a common body
containing the whole Hungarian Parliament together with some Croatian
delegates. Education, culture, law, economy and administration were separate in
Hungary and in Croatia.

However in second
approximation there were some common matters between the two halves of the
Monarchy, namely defence and foreign policy. For these matters both Parliaments
sent delegations (with Croatian delegates as well in the Hungarian delegation)
to make decisions. In addition the two halves agreed in customs union for 10
years, which agreement was repeatedly renewed until the end of the First World
War.

Therefore

1) East Central Europe
as a whole was not a self-governing or self-regulating unit, because Galicia
and Dalmatia were ruled by Austria. However note that
the 1881 Linz Programme of the German parties of the
Austrian Imperial Parliament suggested the reorganisation of the double
monarchy by transferring Galicia and Dalmatia to the
eastern half. The suggestion was not accepted; however afterwards Galicia got
limited autonomy, while there was a continuous increase of influence of local
Croatians compared to local Italians in the administration of Dalmatia. In the same time Hungary continuously demanded
the transfer of Dalmatia to Croatia.

2) The core territory
of the region, the Carparthian Basin, i.e. Hungary
with Croatia, was in principle self-governing in all questions relevant in
economic development. The customs union was an agreement, and if great needs
be, free not to be renewed. However practically the existence
of this union established a coupling in economy.

3) On the East Croatia had a limited
possibility to regulate her own close up via the educational and cultural
regulators, and in a less extent, Galicia had the same possibility.

The situation will be
demonstrated on the Hungarian strategy of close up by long-range regulators.
The example has been chosen on the ground that until the First World War in the
region Hungary had the widest possibility to determine her own regulators.
Before this review two technical notes are

made:

1) The jurisdiction
process of Hungary results in laws named after the year and a Roman numeral
followed by a "tc" which indicates the sequentional order of the law in that year. For reference
we mention these numerals. For details see Refs. 2 and 9.

2) As told earlier,
the term "Hungary" needs a nontrivial definition. As a rule here for
cultural, and partly for legal, issues, Hungary stands for Hungary proper, not
including Croatia. On the other hand, for financial and foreign issues
"Hungary" is Hungary and Croatia.

While this needs some
attention, one cannot help, because this complication originated just from the
special position of the Central Eastern European lands, territories and
countries.

Regs. 1: Laws

As told earlier, the
legal system of Eastern Central Europe did not
originate from that of the Western Empire or any Western state. In addition,
the medieval legal system here survived until the middle of the 19th century, therefore modernization of economy
and society needed legal changes. (However, note the quantitative differences
between the Hungarian system and that of e.g. the Ancien
Regime in France. In Hungary i) no chain of vassalage
existed, so each noble was equal, directly depending on the Crown; ii) the
percentage of nobles was in the neighbourhood of 10 %; iii) some local groups
were more or less self-governing, and their territories free of the medieval
landlord system. As a result, the share in voting power for the Parliament was
higher in 1830 in Hungary than in contemporary modernised France.) The biggest
steps of this process followed each other as listed below:

1848. tcc (a whole
sequence): Establish legal equality of all male citizens, including
taxation according to common principles. (Note: this decision did not
completely eliminate prerogatives of nobility. E.g. all noblemen retained their
voting power, while commoners got it only above a certain level of income.
Reason: existing rights were not confiscated.)

1881. XLIV tc:
Supports the home industry. Freedom from taxation for 15
years if the factory is sufficiently up to date, either existing or under
construction. This law substitutes the custom laws for which the
Hungarian Parliament had no authority, such questions belonged to an
Austro-Hungarian body of delegations of equal number (and the Hungarian
delegation must have contained Croatian delegates of prescribed number too).

1890. XIII tc:
Widens the above preferences.

1907. III tc:
Gives the possibility for such support in any industrial establishment, if
economic reasons suggest.

At the beginning of
the new century complete legal equality of male citizens is an established fact
in Hungary; earlier preferred or dispreferred
classes, religions and other groups have been equalized, with some exceptions
in the voting power, and with special legal regulations for big lands of feudal
origin. This situation is comparable to the contemporary Great Britain, except
that the percentage of the population with voting power is lower, somehow
between 6 and 10 %. Industry and finance are completely free.

Regs. 2: Monetary, fiscal &c. regulations

1848: Customs agreement with Austria on the basis of greatest
preference.

1850: Austria unilaterally forces customs union.

1864: Stock market is established in Pest (one of the precursor
cities of the later capital Budapest).

1878: Reorganisation of the Austrian central state bank on
dualistic basis.

These regulations
generally were made as external agreements. As told above, neither Hungary, nor
Austria had the right to regulate her own external relations and defence: these
issues together with the finances supporting them were common issues of the two
independent states Hungary and Austria, determined by the mixed delegations of
the two Parliaments (or three, including the Croatian one), and in the lack of
any "federal" government the administration of these issues was done
by the offices of a common foreign ministry, a common ministry of defence, and
a common ministry for the finances of the foreign affairs and defence. (In
addition, the ministry of finances for common foreign affairs and defence
governed the Territory of Bosnia, whose position between Austria and Hungary
was rather obscure. Until 1908 the same ministry administrated the NovipazarSandjak, belonging to
the Ottoman Sultanate, given by the Berlin Conference to Austria and Hungary
for administration, and separating Serbia and Montenegro. This task ceased by
the peaceful reoccupation of the Sandjak by the
Sultanate.) Neither part of the Austro-Hungarian complex had its own monetary
system, and had no right to introduce it. Separate customs territories were
possible in principle, but only after a long and difficult process of not
renewing the customs unions. Until the end of the First World War no separate
customs territories were established.

Regs. 3: Infrastructure

The whole Eastern
Central European region was behind the West in the middle of the 19th century
for the development of the so called infrastructure, including roads, railways,
enbankments, etc. The Hungarian government strategy
was to concentrate the available financial sources here, because an improved
infrastructure would result later in higher incomes, consequently taxes. Infrastructural
investments just after 1867 were high, while in this period their profit was
negligible. After a quarter century the share of this area went much down in
the investments, but the profit increased. The explanation is that the first
quarter century was necessary to reach the level of profitability in
development.

While these
investments were by no means purely made by the state, the state had a great
possibility to regulate them, and in this area the Hungarian (Croatia included)
souvereignity was complete.

The first process was
to promote investments into railway building. Up to 1875 this was achieved by
indirect means, namely the Hungarian Parliament guaranteed a fair profit for 10
years for anybody who got the licence to build a line. From 1876 the state
treasury started to buy up the private lines, by which the Hungarian State
Railways became the biggest employer of the country, and railwaymen became
state employees similar to soldiers, customs officers etc. This new status of
the Railways led to frictions between the Hungarian and Croatian authorities
about ruling the network. This indirect or direct investment activity
definitely helped the close-up in the density of railway lines.

The next step was the
building of artificial waterways and other regulations of natural waters; from
1878 the state started to organize the building of the so called Ferenc Channel between the two great rivers, the Danube and Tisa and backwards in
the area which is now the Voivodina. Henceforth some
laws promoted the activities as follows:

1879. XXXV tc:
Regulates River Tisa. The total length of the menandering
river was reduced to 60 % by shortcuts. Result: floods became less
frequent, new lands became available for grain, and in the same time fishing
was reduced. A large part of the river became available for steam ships.

1888. XXVI tc:
Prescribes the regulation of Danube at the so called
Iron Gate between Roumania and Serbia. It was based on
a multilateral agreement. At the Iron Gate the river was
very narrow, therefore the stream was too strong for
shipping upwards. The regulation made the Danube an efficient international
route to the Eastern seas.

1895. XLVIII tc:
Orders the regulation of the Danube within Hungary. With this all
the Danube of Hungary became available for steamers.

1897. XVI tc:
Nationalisation of the telephone system of Budapest.

1898. IX tc:
Establishes the Hungarian Oriental Shipping Company.

Regs. 4: Education, Research & Development, &c.

1868. XXXVIII tc:
Orders education for everybody up to age of 15.

1872: Erecting the second university of Hungary in Clausenburg.

Later laws tried to
solve the problem of a centralised education system in a multilingual country.

2.3.
The CarpathianBasin at the eve of the first world war

In 1900 Budapest became a big
European city comparable to Vienna, or to Munich not only for
size but also for the general level of industrial, civilizatory
and artistic level. For the English-speaking reader we can recommend the review
book "Budapest 1900", by John Lukács. Here
we stop for a moment just before the First World War. For such a stop and
overview the most convenient year is 1910, when in the whole Austro-Hungarian
Monarchy population counts were made according to common principles [10]. In
some pie diagrams one can compare the structures of employment of the 4 more or
less independent countries of the region (Hungary, Croatia, Galicia and Dalmatia) to other countries of all regions of the
contemporary Europe.

Fig. 4 shows the
distribution of various religions in Hungary and Croatia in 1910, from an
East-West cultural viewpoint. No doubt, in that time religion strongly
influenced the everyday way of life. From the above viewpoint 3 blocks of
religions will be distinguished among the 7 religions individually handled in
the population counting process in the Basin.

3) In between. The Greek Catholic Church, with Byzantian
rite but accepting the filioque dogma and Roman
leadership.

All other religions
counted as Others, remained in each county under 0.1 %
individually and 0.3 % together. (The Basin was divided into 72 counties, 63
Hungarian and 9 Croatian ones.) A block is considered "dominant" on
Fig. 4 if in a county it is the biggest. Then Fig. 4 shows that in 1910 in the
biggest part of Croatia+Hungary it was dominant to
belong to the West either directly (Block 1) or indirectly (Block 3). The
Eastern substrate was characteristic only in an Eastern wedge based on Serbia
and showing to the North. This wedge was partly a product of the 150 years of
Ottoman rule.

Fig. 4:
Religions in Hungary and Croatia in 1910

Within the Western
group Roman Catholics were absolute majority, but mosaic-like one could find
counties of Lutheran and Calvinist majorities as well. No bigger unit with
Unitarian or Israelite majority existed; for both the highest ratio was between
20 and 25 %, in a Szekler county in Transylvania for
the first, and in Budapest for the second.

Hungary was a
multilingual country, and language is not a topic of this paper, not being
among the important long-range regulators. So we only note that in Hungary
proper (i.e. without Croatia) the biggest language group was the Hungarian
(Magyar) with 54.5 %. Croatia had some 65 % of Croats and 25 % Serbs. Religions
correlated with languages; in some cases strongly, in some cases weakly. In
Hungary Roman Catholics were mainly Magyars, Slovakians, Germans or Croatians.
Calvinists were almost exclusively Magyars, Lutherans mainly Slovakians and
Germans, Unitarians exclusively Magyars, Israelites mainly Magyars and in a
less extent Germans, Greek Catholics mainly Ruthenians
and Roumanians and Greek OrthodoxesRoumanians and Serbs. In Croatia the correlation was
rather strong: Roman Catholics were Croatians, and Greek Orthodoxes
were Serbs.

Figs. 5 and 6 display
the employment structure in Eastern Central Europe in 1910, compared to that in
the rest of Europe. Eastern Central Europe is then characterised by a high
enough share of agriculture, however with non-negligible industry and commerce.
Note that within Eastern Central Europe the structure is "more
Western" or "modern" in the two countries not belonging to Austria,
so not governed from the West (of Central Europe). Since it is extremely
improbable that Austria would have "exploited" the poor countries of
Galicia and Dalmatia, we must see the result of a
close-up strategy, possible in the Basin due to the souvereignity
of the Parliament of the Basin (which we cannot name, because it had no name of
its own), but impossible with simple Landtäge. The
employment structure in the Basin was transitional between East and West, but
not unlike to the South. In Eastern Central Europe Hungary showed the
"most modernized" structure, similar to that of Italy. This
similarity would be preserved until c. 1965.

Fig. 5: Shares in employment
in Central Europe at the beginning of the 20th century (for a
while see instead Table 1)

Table 1

Country

Year

Agriculture

Industry

Transport and commerce

Other

Eastern CE

Croatia

1910

69.6

17.0

4.0

9.4

Hungary

1910

60.1

18.9

6.0

15.0

Galicia

1910

79.9

6.2

6.1

7.8

Dalmatia

1910

85.2

4.3

4.1

6.4

Western CE

Austria proper

1910

42.3

25.0

13.5

19.2

Germany

1907

33.1

37.4

11.6

17.9

Bohemia

1910

38.1

34.5

10.7

16.7

Fig. 6: Employment structure
in other regions of Europe at the beginning of the
20th century (for a while instead see Table 2)

Table 2

Country

Year

Agriculture

Industry

Transport and commerce

Other

Southern

Italy

1911

53.5

29.5

5

12

Portugal

1910

51.0

23.0

6.4

19.6

Northern

Denmark

1911

36.4

27.3

10.0

26.3

Sweden

1910

48.4

32.3

13.5

5.8

Western

Belgium

1910

24

48

12

16

Holland

1910

28.4

34.7

18.3

18.6

France

1906

42.5

25.0

14.0

18.5

United Kingdom

1911

11.3

56.6

12.6

19.5

Eastern

Bulgaria

1905

82.0

7.3

3.8

6.9

Roumania

1910

66

10

5

19

Russia

1897

77.2

11.5

5.7

5.6

2.4.
The post-war changes

In
1914 started the First World War. At its end, between 1918 and 1920,
serious changes happened in the region. Briefly they can be summarized as
follows:

1) The
Austro-Hungarian Monarchy was dissolved.

2) Hungary shrank to
the center of the Carpathian Basin. Her peripheries
went to states outside the region.

3) The personal union
of Hungary and Croatia was dismantled
and Croatia went to a state
outside the region.

4) Poland had been
restored, however with a substantial Eastern and some Northern parts, which may
or may not have belonged to the region of Eastern Central Europe.

As a consequence one
may say that between the World Wars the region was represented by two national
economies, that of a new, smaller Hungary, and that of the
new, greater Poland. It is doubtless
that all of the territory of Hungary belonged to the
region, while Polish data contain the contributions of the new territories.
Therefore henceforth comparison to other parts of Eastern Central Europe is
impossible. We, furthermore, must continue the study with a lesser Hungary, so some data
are not comparable even for Hungary before and after
1920, because of the substantial changes in area and population.

The period between the
World Wars was a general stagnation for all of Europe. No close-up
strategy was possible for Hungary until the Great
Crisis, because long years were needed to reorganise the national economy
according to the new numerous customs borders. As a single
example, the Hungarian grain mills, concentrated in Budapest
at the great railways centers of lines coming from
the fields and going to the Western markets remained without the grain from the
southern lands. Therefore some factories simply became superfluous.
After years of reorganisation started the Great Crisis which
shook Hungary,
although not so strongly than the West. However she was able to
regain her relative position.

We mention only 3
characteristic changes between the World Wars as follows:

1) The weight of
agricultural population continued to decrease: from 60.3 % (1910) to 50.8 % (in
1930); the weight of industry and commerce continued to grow. Roughly the
Hungarian employment structure evolved parallelly
with that of Italy.

2) In the industry the
employment share of small enterprise decreased from 47 % (1910) to 39 % (1938).

3) The use of
electricity fastly increased, so strongly that the
decrease of area did not result in a perceptible jump back, as can be seen on
the graph at the end of this paper.

All of these changes
are generally considered "modernisation".

2.5.
The socialist period

After the Second World
War soon Hungary became the part
of an economic community centered in Eastern Europe. In that time
some modernisation continued to go on; "modernisation" was a slogan
of the Eastern ideology. However, at least between 1949 and 1968, the modernisation
was not regulated by long range regulators, but by orders based on natural
quantities of some products regarded as "modern". Consequently the
employment structure continued to change in the general direction of
modernisation, although the lag behind Italy became
perceptible from 1965. For electricity the increase continued roughly parallelly with the leading part of the world. However the
weight of the tertiary sector remained small, and
there appeared an increased lag in the GDP/capita.

The period of planned
economy can be divided into two parts. Between 1948 and 1968 the economy was
directed by commands based on plans or superstitions. After 1968 regulations
became "indirect", so the long-range regulator concept became again
very useful, and from that time the country continuously reestablished
the Western connections, thus deviating more and more from her Northern,
Eastern and Southern neighbours. However, interestingly, the very important
turning point in 1968 cannot be seen in the aggregate economic data of Figs. 7
and 8.

Fig. 7: Net investment rate
in Hungary. Note: Observe the high and growing
investment rate in the socialist era. After 1982 this rate returned to its
pre-war values.

Fig. 8:
Home consummed GDP/capita. Note: 1914=100

Fig. 7 shows the (net)
investment rate in the period. Before the Second World War this rate was
permanently between 8 and 10 %. The forced close-up is demonstrated by the
sudden jump to a higher value, and even more by the continuous increase of the
rate. Until the end of 70's the planned economy was able to maintain an
exponential growth of GDP (Fig. 8), however on the cost of forcing more and
more the investments. Even so, the exponential growth broke down at the
beginning of the 80's, and then the investment ratio started to return to a
moderate level similar to the inter-war times before planned economy. So the
close-up strategy of Hungary's socialist
period ended somewhere in the first half of the 80's [11].

At the end of this
Chapter we give Figs. 9-11, which compare the raw iron production, electric
consumption and GDP/capita for Hungary and USA, roughly during
a century. One can see that

1) In iron production Hungary's lag was
slightly growing until the First World War. Between 1940 and 1970 the Hungarian
increase was relatively faster.

2) In electricity the
Hungarian and American developments were parallel between 1920 and 1980. No
close-up is seen, but no increase of lagging either.

3) In GDP/capita the USA started from an
initial level at 1867 four times higher than Hungary, but Hungary was able to keep
this initial ratio roughly constant. However from 1931 the Hungarian currency
is not convertible, and from 1948 the currency rates became purely arbitrary.
So Fig. 11 stops at that year.

Fig. 9:
Crude Iron production in USA and Hungary

Fig. 10:
Electricity consummed in USA and Hungary

Fig. 11:
GDP/capita in USA and Hungary

However, in the last
200 years the main desire in the Hungarian soul is not the close-up to distant USA but the catch up
with neighbour and sister country Austria. So Fig. 12 is
the ratio of the two countries' GDP/capita. After the First World War both data
strings are rather uncertain, but sophisticated estimates do exist. We use the
data of Refs. 12 and 13, and, indeed, our Fig. 12 is almost a transformation of
one of the Figures in [13]. For the GDP ratio some corrections are needed.
Namely: i) between 1921 and 1937 Hungary's NNP is
converted to GDP by a constant factor 1.55 to reproduce the average ratio known
for 1925-34; ii) after 1945 existing ratio estimates are used (for these two
items see the text of Ref. 12); and iii) the Schilling-Pengő
parity was cca. 0.80 in
1937.

Now
the moral of Fig. 12. The long and systematic efforts of the Parliament
of the Basin resulted in the increase of the ratio from 0.58 to 0.70 until
1913. After the First World War the increase continued, ended with 0.86, so
catch-up was not impossible first after the Middle
Ages. The socialist era broke this trend, but in its first half returned only
to the ratio of 1913 (the last peaceful year of the Double Monarchy) and
stabilized there. However after 1973 the ratio drops steeply, and at the end of
the socialist era Hungary is back at a relative position similar to that at the
beginning of the Reform Age in 1825, 165 years before. In short 17 years she
slipped back as much as was the slow climb-up of 88 years before the First WorldWar.B

Fig. 12: Hungary's race to catch
up Austria since 1850. Note: It is remarkable the gradual
close-up until 1938, the slide back and stagnation until 1973, and the later
decline.

However mere 17 years
is nothing in the ages-old race of the two countries. What can be lost by
mishandling in relative position, can be won back as well in comparable time byappropriatestrategy.

3.
THE FORECAST OF THE PRESENT CLOSING UP ATTEMPT OF THE REGION BY MEANS OF A
GENERALIZED KOVÁCS -- VIRÁG DINAMIC ONE SECTOR ECONOMIC MODEL

In this chapter we
briefly present a quantitative approach of predicting the outcome of a possible
closing up strategy of the central European civilization to the west European
civilization. In this study we have determined the lower and upper bound of the
"cost" of the closing up growth path for Hungary.

In [14] we formulated
a generalization of the Kovács - Virág
dynamic one sector economic model [15] and gave solutions optimalizing
the consumption function.

One can slightly
modify this model to obtain a quantitative predictions
about the time horizon of the present closing up attempts of our region.

The basic equations of
this modified one sector economic model are

dK/dt
= qsY - λK,(3.1)

Y = gK,(3.2)

where the savings rate s is a
function of the time

s = s(t),

λ is constant (depreciation
rate of capital stocks), the efficiency of the capital g is a function of the
savings rate and the time

g = g(s, t)

and the investment to capital multiplicator is a function of the time

q = q(t).

We have specified the form
of capital efficiency in [14] as follows

g(s) = βs(1 - s)γ,(3.3)

where γ is a constant in
time (around 4 in Central Europe according to quantitative
analyses) while ß can depend on time.

In evaluating the
generalized Kovács - Virág
model we specified the time dependence of investment to capital multiplicator and the capital efficiency in the following
manner

q(t) = (q0Tq
+ q1t)/(Tq + t),(3.4)

β(t) = (β0Tβ
+ β1t)/(Tβ + t),(3.5)

We note that with the explicit time dependence in the saving rate, in
the capital efficiency and the introduction of the time dependent investment to
capital multiplicator enables the model to describe
transition processes a phenomenon characteristic of an economy being in closing
up state.

Numerical analyses
(not cited here) give the following values for the parameters in equations
(3.4-5). The Hungarian value of β0 was 3.53 y-1
at the end of 80's, while the contemporary Italian value was higher by some
2/3. The q value of the average of the 35 years up to 1986 was 0.84 in Hungary, while the
corresponding West German value was 1.36. Therefore the initial and final
values of a reasonable close-up path are

β0 = 3.53,β1 = 5.76,

q0 = 0.84,q1 = 1.36;

what remains is the values of the characteristic times of changes in
(5.4-5).D We were looking
for a path of optimal total consumption in 15 years, which ends at the half of
the present Austrian GDP/capita.

The results are as
follows. The path cannot end at the target GDP/capita if either of Tq
and Tβ is larger than 3 years.

So, fast privatisation
and technological renewation are needed.

Loans without real
interest rate (e.g. a new Marshall project) may
help. If investments can be finished 2 years before paying back, then the
desired path is marginally possible with the characteristic times 10 years for
complete technological changes and 4.5 years for privatisation + efficient
stock market.

We have also
calculated growth paths of optimal total consumption in 10 years, which end at
the Portugalian GDP/capita in 2005 (assuming a 3 %
average growth rate for the Portugal economy in the
next 11 years). We calculated two paths, one of them
applies the assumption that the hidden economy is legalizable
at the start of the growth path, while the other assumes that it is not legalizable. In the first case the parameters Tq
and Tβ take values 3 years and 4 years, respectively, on the
growth path, while the average half gestation time takes value 1.9 years. In
the second case Tq=Tβ=5 years and the half gestation
is equal 0 years. Then one can calculate the cost of these growth paths to be implementable, and obtains that the lower bound of the
needed cost-free external source is about 6-8 billion USD (used 2/3 of the
amount for the legalization of the hidden economy at starting period of the
growth path) and the upper bound is about 16-18 billion USD partitionated
for the 10 years in a slowly growing manner. Figure 13 shows the investment
rate and growth rate on thesepaths.E

Fig. 13: A 10 years path optimalizing total consumption and enhancing GDP by 2.7 for
an economy with the average data of Hungary. Note: Time
scales: New technology 5 years, privatization 5 years, gestation 0 year. Details in the text.

Here some historical
data are collected for the convenience of Western readers about steppe nations
almost unknown in the West but mentioned in the present text and present in the
everyday historical memory of the CarpathianBasin. The Reference numbers restart here. The
nations, tribes, peoples &c. are alphabetically ordered here. See also the
short explanations in [1], which paper will not be explicitly cited henceforth.

For brevity, if not
indicated otherwise, dates are meant in AD. A number of shorthand notations is
used, namely: E.=East(ern), S.=South(ern), W.=West(ern), N=North(ern), P.=Prince, K.=King, Kg.=Khagan,
R.=River, c.=about (in time), ct.=century, bw.=between.
"Basin" means CarpathianBasin, and "obscure"
is to be read as "still a matter of argumentation". ~ stands for the
entry.

In some cases the
Hungarian literature is the most detailed (among the steppe nations Hungary founded the
first Academy of Sciences) and often is
not translated to Western languages. This we cannot help.

After the entry the
most common name used in the Basin in singular is given in brackets.

This Appendix has its
own reference list. When looking for an item in literature, note that in
Hungarian, Chinese and Japanese names family name comes first (at least when
the text is also in one of these languages).

Avars (Avar)

Possibly
the zhuan-zhuans of early Chinese chronicles [2].
C. 500. ruling in the Altai (now Kazakistan
and S. Russia). Defeated by the uprising Turks led by Kg. Bumın (and by the mythical Grey Wolf) in the first
half of March, 552 [3]. Led by Kg. Bayan
to W., in 565 defeat the Thuringian K. Sigebert I at the R. Elbe (FRG). Thence turn back
with Slavic tribes (probably Serbs, Croats and pre-Slovaks) and enter the Basin
in 567 [4]. Anti-Gepidic coalition with the Lombards; take the Gepid lands in
567, and, by a Treaty of 200 Year Friendship, the Lombard lands on the Easter
Monday of 568. Second unification of the Basin. (For
the first see Huns.) 630: extinction of the Bayan
dynasty. Steppe territories E. of the Carpathian lost. First in history the
Basin is a self-governing unit (with border guard tribes on the outer slopes).
680: reorganisation of the state after immigration of new tribes (probably Onogurs from the First Bulgar
state) led by P. Kuber [5], [6]. 791: Frank attack,
completely unsuccessful and disastrous [7]. 795: internal struggles exploited
by Count Erik of Friuli. AvarPannonia is subjugated by
Franks. 805: E. half of the state subjugated by Kg. Krum of (Danube) Bulgars [5].

The subsequent fate of
~ is obscure. Until 822 (or 840) names of Christian AvarKhagans are known. (E.g. Theodorus and Abraham.) They were subjects of the
Frank Emperor so must have belonged to the Roman Church. ~ probably
were assimilated by the incoming Magyar tribes. Arguments exist for and against
linguistic similarity bw. tribes entering the Basin in 680 and 896 [6].

The exact time of the
settling of Serbs and Croats on the Balkan is a matter of argumentation. Some
scholars believe it to be pre-Avar, in which case ~ could
not have had a role in it. However it seems to have happened in the Avar era [5], [8] and the 6 Croat leaders of the migration
mentioned by KonstantinosPorphyrogenetos
have all Turk names [9] which, in any possible time, could not have been
anything else than Avar (or related). See also [10],
and for reconstructed previous locations, [11].

Since
Bulgarian belongs to a special subgroup of Turkish languages (the r-group),
inheritors of Bulgarians can be recognised among Turkish peoples.DanubeBulgaria has survived. VolgaBulgaria existed until
ct. 13 and her successor people and state is the ChuvashRepublic of the Russian
Federation (Middle Volga, near Kazan). The old Turkish words of
the present Hungarian language are of r-Turk, so probably Bulgarian.

Chasars (Kazár)

Successor state of the
W. Turk Chaganate, core territory among the Volga,
Don and Mtn. Caucasus, Sarig
Sin (White Wall, in Russian times Tsaritsin, later
Stalingrad) keeping the narrow gateway between the rivers. The 7 Magyar tribes
lived on the W. periphery of the Chaganatebw. 750 and 830; in 830 the
Magyars picked up 3 rebel tribes of the ~ (the Kabars).
Mixed population in the Chaganate; the leading ~ Turkish.
Defeated but not subjugated by P. Sviatoslav of
Russia in 976, then decaying until the Mongolian invasion in ct. 13. Assimilated into the Golden Horde c. 1240. For some details
see [12].

As for culture, the Chaganate was a focal point of influences of Byzantine,
Arab, Steppe and Varaegian (Middle Swedish) cultures.
In c. 750 BeghBulan
accepts the Old Testament religion in Karaitic form
(i.e. without Talmud), the common part of Judaism, Christianism
and Islam [13], [14], [15], [16]. The extent of conversion is obscure, but Karaitic communities survived in Krimea
and Lithuania, the latter
speaking Kipchak Turk. C. 840 Kg. (or Begh) Obadia accepts Judaism. In
the Chaganate also Christianism
and Islam were widespread [12].

The Kabar rebels of ~ entered the Basin with the Magyars in
896, transferring thither some Chasarian culture. Khasdaiben Yitzhak ibnShaprut, Prime Minister of
the Cordoba Chaliphate contacted K. Joseph of the ~ c.
955. In the answer K. Joseph mentions Bulgarians and Magyars (or maybe Onogurs?) as previous Chasarian
tribes, having gone to the Danube. For the most detailed
surviving text of this letter, found by Abraham Firkowicz,
see [17]. It gives various details of cultures in Chasaria.

Cumanians (Kun)

Kipchak
Turks fleeing from Mongols into the Basin in 1240, led by K. Kuthen. Now in Europe the Cumanian language is spoken only by the Lithuanian Karaims. In Hungary free subjects of
the Crown. Local Cuman autonomy dissolved in 1872.

Gepids (Gepida)

East German tribe,
subjects of the Huns, leading the uprising against Huns in 454. Then rulers of the E. half of the Great (Hungarian) Plains, E. of
the R. Tisa.From c. 520
bitterest foes of the Lombards.In 567 defeated by Avars and Lombards [4].Still in existence
along R. Tisa c. 950.

Possibly
the Hiung-nus of early Chinese chronicles [2]; maybe
of mixed Turkish-Mongolian origin.At the end of ct. 3
BC triggering the erection of the Chinese Great Wall. BC 209-175: Kg.
Mao-Tun. Starting to W. in ct. 2 AD. Crossing the Volga
(led by Balambér) in 375; immediately subjugating the
majority of Goths and triggering the Migration Period for Europe.

Great King Attila
(433-453) rules an empire from France to Central Asia. For details see [18], [19]. Under his rule was the Basin
first united in historic times (and as far as it can be known in any time at
all). However this united Basin was not self-governing then
but a part of a huge empire. He dies in 453, and next year the empire
breaks up in a revolt led by Ardarich of the Gepides. ~, led by Irnak, son of
Attila, retreat to N. of the Black Sea.

The later fate of the
~ is somewhat obscure. A state of the Black ~ is in existence in 681 when
Bishop Israel of Georgia is fairly
successful in converting them to Christianism [20]. Hephtalits subjugating N. India in ct. 6 are
called also White ~. According to Gumilyov [21] Asian
Huns in the Hosi region (China) survived until
c. 500, and then their Asina clan went to Avars, thence Turks, founding the Turkish state. The
Bulgarian states may be of Hunnish origin. The Szekler tribes (speaking Hungarian)
in the S-E.part of the Basin traditionally
originate themselves from the ~. The founder dynasty of the Hungarian state
from 896 regarded itself as descendants of Attila the Hun.

Hungarians (Hungarus, uhor)

Up to 1920 the common
word for subjects of the Basin (except Croatia) with no
relation to language. Since 1920 the term has a narrower meaning: the subjects
of Hungary (dominated by
Magyars) in the center of the Basin plus Magyars
anywhere. In Slovakian, however, the equivalent word uhor
means Slovaks plus Hungarians together.

When applied to
language it always means the language of Magyars.

Originally the word
meant the Onogurs of the Basin in the ct. 8-9, and
went continuously to the new state and nation after 896 in W. use.

Jazones (Jász)

Iranian
horsemen, entering the Basin in ct. 14. Nearest relatives are the Osets along the Russian-Georgian border. In Hungary free subjects of
the Crown. Local Jazonian autonomy dissolved in 1872.

Magyars (Magyar)

Dominant
population of the Basin from 896, and especially of the present Hungary. In first
historical notes alliance of 7 tribes, of whose names 5 are Turkish (probably
Bulgarian or relatives), 2 Finno-Ugrian.

First
recontruable location S. of the Ural, c. 500 BC.Possible connections with Huns moving to W.Later on the periphery of the W. Turkish and ChasarianKhaganates until 830. Then moving to the W.,
and stopping to migrate up to now in the Basin c. 900.

Since Old Testament
religions were well known in the ChasarianKhaganate,
and the territory (especially the KrimPeninsula) was within the
radius of the (Eastern) Christian missionarism, ~ can
have known elements of medieval "European" culture before reaching
the Basin; but definitely not in their Western form.

Magyar tribes unified
the Basin third time (for first and second see Huns and Avars).

The language of ~ is
called Hungarian in the W. The present form of this language is mainly
Finno-Ugrian, i.e. a member of a family whose most W. language is Finnish, and
most E. ones are two Ugors (see later). However there
is a strong layer of Bulgarian (or r-) Turkish words. Nearest kins (without the Turkish words) are two small languages,
the Manysi or Vogul (6000
speakers) and the Hanti or Ostyak
(20000 speakers) just E. of the Ural, at the confluence of R. Ob and R. Irtis. Hungarian, Ostyak and Vogul constitute the Ugrish
subfamily of Finno-Ugrish family.

The W. term "Hungary" comes from
the name of ~. Contemporary W. historiography did not observe the
reorganisation of the Basin in 896.

Petchenegs (Besenyő)

Alliance
of 8 (common or z-) Turkish tribes.Until 889
E. of R. Jajik (Ural).Pushing
Magyars to the W. just before 896.Some ~ entering the
Basin c. 950, later assimilated to Magyars.The ~ remaining
E. or S. from the Basin contributing later to the formation of Walachians and Moldovans ("Roumanians") [21].

Jazyges
enter the Basin c. 20, and occupy the Great Plainsbw. Pannonia
and Dacia. Some Roxolani join them during the Jazyg-Roman
War (ends in 176). The Basin Sarmatians become more
or less the allies of Romans. Their last king mentioned is Babai,
killed by Theoderik of the Ostrogoths
[23] c. 469. His subjects assimilate to neighbours.

Alans
divide into branches in ct. 2 BC with different fates [22]. E. Alans are dominated by Huns from 200, participate in Hun
movements and some go as W. as France. Some Alans are independent in the Caucasus up to 450, may
meet with Magyars (or with Onogurs), and can be seen
until ct. 13. 3 other groups are Antae, Choroates and
Serboi.

Antae are in Moldavia after 200, where
divide into two branches. One goes to W., settles in later Poland (Zakrzew graves). This kingdom is subjugated by Attila of
the Huns c. 440. The other group remains in Moldavia until the
retreat of Huns to the E., and afterwards (c. 470) extends its rule to Kiev.

This kingdom is
subjugated by Avars at the end of ct. 6. "After
AD 500 the Serboi, Choroates
and Antae (Alanic tribes) are gradually absorbed by
the Slavs over whom they reign." [22]. So the
Serbian and Croatian nations seem to have founded by Sauromatians.
Note that within the Indo-European family of languages the nearest kin of Slavian group is Iranian, to which Sauromatian
belonged. The possible successor states of Antae may be Poland and Ukrainia, but with one remark. The later Poland was formed by N.
(Polyan) leaders occupying S. (Wislyan)
territories. Now, the latter ones around Cracow are called also White
Croatians. White Croatians were allies of the Hungarian state from 896. Their Cracow territory was continuously
incorporated into the Polish state from 962 by K. Mieszko
of Poland. In Bohemia the Slavnik clan of White Croatians (center
in Libice) concurred for high power with the Premisl clan of Czechs (Prague) but became
exterminated c. 995 [24].

In mediaeval Polish
historiography Sauromathians as organisers of the
Polish state was a commonplace.

A convenient steppe
timetable of migrations can be found in [26].

As for the possibilities
of Western influences in culture and legal system on peoples prior to entering
the CarpathianBasin, one can
conclude as follows.

1) Huns moved too fast
to get any Roman influence. They lived together with Germans for decades, but
these tribes were Eastern Germans, at which no clear data for private property
of land &c. are known.

2) Avars
remained outside of East Roman or Christian territories until the CarpathianBasin. In the Basin
they may have got Western influence, but until the end of the 8th century no wish can be seen on the Avar side to converge to the West. Since in 795 Erik of Friuli was able to occupy Pannonia
after that the Western Avar chief (the tudun) have changed sides, it is possible that by then
convergence was a program in some groups of Avars.
The Christian Khagans and cross motives in Avar graves are signals. If so, there was a pre-phase of
convergence by long-range regulators c. 800. However the Christian Avarstatelet was not quite
self-governing.

3) As for Magyars, various
pre-Basin Christian influence may have existed. Note
that Nestorian Christian missionary activity is proven in 781 as east as China by the Chang Ngan stele [26]. Also, Old and New Testament teaching could
very easily be picked up in Chasaria and their
devotees must have been among the Kabar tribes
joining the Magyars. However there "Christian" did
not mean "Western" at all. It was Byzantine, or even more
eastern variety. (Georgia and Armeniawere Christian from the beginning of the 4th century.) Still, such pre-Basin influences
were important because they made the conversion to Western Christianity of Pannonia much easier.

AThe present Croatian-Serbian
border is not too far from the Theodosius line; we suggested in 1995 that this
is not an accident. The fact is quite uninterpretable
in the paradigm of linguistic nations, fashionable in 19th century.

BThe trend is not clear in 2007. It seems that the
fall-behind did not continue, but we are well below the 1913 relative level.

CIt might seem
natural & symmetric to write Poland + Lithuania. However, Lithuania started to
converge only in c. 1400, and her tradition was not a numerous and roughly
equal mounted archer class, but numerous swordsmen, both mounted andnot. So the
initial conditions & timescale for the convergence somewhat differ, so the
process might differ as well. The problem would deserve investigation; maybe
some Polish/Lithuanian colleagues will do it.

DThe exposition in 1995 was rather laconic, so some
explanation would help. Parameter q expresses the “efficiency” of an investment turned into capital. In optimal case the investment
of the previous year would be a capital next year (amortisation being
explicitly handled in λ). We had performed numerical fits for some decades
using Hungarian and West German data (and a few other old Common Market
countries as well) and got q=0.84 for Hungary between mid-50’s
and mid-80’s, and 1.36 for BRD. The Hungarian number means that some 16% of the
investments were “lost” (say, irrational and then abandoned); private ownership
of capital keeps such losses low. On the other hand, in West Germany q was >1, so
“new capital were created from nothing”. Our guess was a multiplicator
effect: the market value of a good
investment goes up. As for β, it
is some efficiency of the production, so it increases with technical
advancement. So we tried to simulate a smooth, rational transition.

EPaths discussed here have not been realized between 1995 & 2007: the growth rate was
always well below 10%. This is not the deficiency of the mathematical model.
The model is not a prediction, but
the optimal path (meaning maximal
consumption in an interval of length T with the given initial conditions at
t=0). The optimalisation means e.g. investment in the
best way. While the non-optimal growth would deserve discussions, an optimum is
of course never realised.